Q&A With Taniel About Buying a Property in Mexico

Q&A With Taniel About Buying a Property in Mexico

With 16 years of real estate behind him, Taniel gets a lot of great questions from buyers trying to figure out the path to owning property in Mexico. Of course, parts of the process are the same as buying in the US or Canada. But other parts are very different.

So, where do you begin?* Taniel answers that question (and more) below.

*Spoiler alert—the most important thing is finding a reputable agent who you can trust.

Keep reading for the top 12 questions he gets the most about buying a property in Mexico.

Q1. How do you find a reputable agent in Mexico?

As of right now, you don’t have to be licensed to work in real estate in Mexico.

I recommend finding an agent through the Asociación Mexicana de Profesionales Immobiliaros (AMPI)—it’s the Association of Realtors in Mexico. All their agents have to abide by a certain code of ethics and rules, and they go through training throughout the year.

So, the bottom line is to make sure they’re an AMPI agent, and you could always interview some of their past clients to be sure they are a right fit for you.

Q2. What is the biggest difference between buying property in the US or Canada and Mexico?

One of the big differences is that Article 27 of the 1917 Mexican Constitution prohibits foreigners from owning properties in the Restricted Zone—property along the borders and coastline. So that means if you want that beachfront dream home or any property within 31 miles of the coastline, the title has to be held in a real estate trust. But not just any real estate trust… get this…

In 1973, the Mexican government realized they were missing out on some foreign investment opportunities, so they established a real estate trust with a Mexican bank.

The trust has a 50-year renewable term, and the buyers are the primary beneficiaries of the trust.

However, your family members or friends can be added as substitute beneficiaries and inherit the property.

It’s quite flexible in that respect.

Q3. Is there an inheritance tax in Mexico?

Mexico has no inheritance tax (for now), which is a huge difference between here and the US.

For example, if a couple owns a property and it’s in the trust, and one of them passes away, the survivor becomes the 100% sole beneficiary through the right of survivorship (as long as they deeded their property as such at the closing). When all primary beneficiaries pass away, the substitute beneficiaries become the primary beneficiaries through the assignment of trust rights.

In either of the scenarios mentioned above, there is a closing cost associated with modifying the trust, which the notary will provide. However, there’s no probate to go through. Usually, within 60-90 days, depending on your trust bank, your substitutes become the primary beneficiaries of the trust.

Q4. Can I get a loan in Mexico?

Mortgages in Mexico are available. However, the interest rates are higher than what we’re accustomed to in the States, and there are also closing costs on the loan itself.

Currently, the loans offered through a Mexican financial institution are in pesos, with a few US dollar loans entering the market.

Most of our foreign buyers here either have the cash or tap into a line of credit back at home. So, they take out an equity line on their house and move the money down here to purchase the property.

Q5. Do I need an attorney to purchase a home in Mexico?

It’s definitely advisable. Would you buy a property in the US without an attorney? You could. But you probably wouldn’t.

We work with many fantastic attorneys and law firms who are all fully bilingual, so you won’t have to worry about communication or miscommunication, for that matter. Additionally, they work with a lot of the big notaries in town, which is really important.

Q6. Do you use inspectors when buying a property in Mexico?

Yes. Usually, the buyer’s agent has a list of home inspectors they worked with and trust.

They charge depending on the size of the unit, so it’ll cost more to inspect a 10-room villa than a 2-bedroom condo. Somewhere between $200-700.

Q7. How much are closing costs in Mexico?

About from 4-6% of the purchase price. However, two of the items in the closing costs are returned in the form of a credit against capital gains when you sell in the future:

  • the transfer tax, which is around 2-2.8% of the fiscal value
  • the notary legal fees

So, if you’re spending 4-6% in buyers closing costs right now, down the road, when you sell your property, it’s less because you’re getting some of those itemized costs credited towards capital gains.

Q8. How much are property taxes in Mexico?

Compared to the US, it’s kind of a joke. A good one, though.

Taxes are about $100-125 for every $100,000 in fiscal value of your property.

For example, the property taxes for Taniel’s current 1000-square-foot condo were $75 for 2022. For a $500,000 property, you’re looking at around $500-$700 a year in property tax.

Also, if you pay the whole year’s property tax bill by the end of January, there’s a 15% discount.

Q9. We can only spend a few weeks a year in Mexico. Can we rent our property out?

Yes, the majority of our clients investing in Vallarta don’t live here full time. About 65-70% of them rent out their unit to generate rental income and pay for their carrying costs.

Q10. What’s your favorite secret tip that most people don’t think about?

If you are buying a furnished home, I strongly suggest taking an itemized photographic inventory.

You might not remember what the artwork looked like or what kind of chairs it had, and they could swap things out. Also, sometimes things break or go missing, but there is proof of everything if you have a photographic inventory.

The listing agent should do it. First, the seller signs off on it, then the buyer signs off, so there’s no doubt about what’s staying in the unit.

Q11. Are there any hidden costs? Or fees that we don’t have in the US?

It’s not a hidden fee, just keep in mind there are closing costs that include a one-time trust set-up fee, and the first-year annual fee. The annual fee for every year after is around $500 plus tax. Plus, there’s the notary’s legal fee for performing the closing operation.

Q12. Are all the paperwork and deeds going to be in Spanish? Am I signing documents I can’t read?

Because English is the first language for the majority of our clients, some documents include a courtesy English translation. In the event of controversy, the Spanish side will prevail. There are a number of documents, including the deed to the property, that are in Spanish only—we help explain these documents to clients.

In Vallarta, we designate a real estate attorney/law firm as a Closing Coordinator for re-sale real estate transactions. Most of the closing coordinators speak English and are often the translator as well

The Wrap-Up

Buying a property in your home country, where everything is familiar, can be stressful. And buying one in a foreign country is even more daunting. You should be extra cautious but working with the right team can make all the difference.  

Hopefully, Taniel has answered some of your top questions. Reach out to info@tanielchemsian.com for his Free Buyers Guide.

Or for a chance to get your own questions answered, sign up for his How to Buy Real Estate in Mexico and Healthcare Options for Expats Free Webinar. 

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